"Results Not Demonstrated"

THE OFFICE OF MANAGEMENT and Budget has been a partial misnomer for as long as it has carried the name. Despite many managerial initiatives, each bearing a hopeful name like "Reinventing Government," OMB has never had much effect on the way federal bureaucrats do or don't do their work. The Bush administration's contribution to the load on our bookshelves, published this year as part of the budget for fiscal 2004, is titled "Performance and Management Assessments." It contains one-page assessments of more than 250 federal programs from A to Y -- from Animal Welfare in the Department of Agriculture to Youth Activities in the Department of Labor. The most common assessment: "Results Not Demonstrated."

One of the more remarkable and timely examples is the Internal Revenue Service effort to collect known delinquent taxes. It's not that there are no results -- the document reports that the IRS hauled in $18 billion of delinquent taxes in fiscal 2001, spending a little less than $1 billion on the effort. It's a management problem: Neither the IRS nor anybody else knows whether that's a good result or a bad one, since the agency has set no goals for the pursuit of revenue and has no way of measuring how much it should be collecting.

"The IRS does not work enough collection cases with its current resources, work processes and technology to ensure fair tax enforcement," an unidentified OMB examiner writes. "Each year, [the] IRS fails to work billions of dollars of collection cases."

The assessment document assures us that the government is making progress: "Re-engineering and technology modernization efforts are ongoing to introduce risk-based approaches to target specific taxpayers with the most effective collection procedure (i.e. notice, phone call, or field visit)."

It certainly sounds as though the ongoing modernization effort has not reached OMB's Buzzword Production Facility: Re-engineering was fashionable in the early years of the Clinton administration, a whole decade ago. Technology modernization dates back to the Carter administration, and the Reagan administration was fond of risk-based approaches. None of it seems particularly likely to help an IRS field agent decide whether to send a letter, make a phone call or get off his duff and knock on some deadbeat's door.

Somehow it's not surprising that the administration's budget proposes hiring 537 new collection employees. If a program brings in more money than it spends, OMB surely can't resist expanding it, even if its own managerial analysis shows that it doesn't know exactly what the program is doing or how, or why.

Another administration budget initiative in this area is more troubling: The budget includes legislation to allow the IRS to hire private-collection agencies, which would be paid on commissions figured on a percentage of what they collected. This is a practice called tax-farming, and it gave the Roman Empire a bad name.

Some may be surprised, but there are government programs that OMB rates "Effective." There's one in the Department of the Treasury, just a page-flip away from the IRS debt-collection report. This paragon is the United States Mint, which has established performance measures based on customer satisfaction and reducing the cost of manufacturing coins. The mint has cut the cost of creating 1,000 coins from $10.27 in 1997 to $8.69 in 2002. At last the nation makes a profit on the penny!

Sticking with sticking it to the Treasury for just one more program, we find that the Earned Income Tax Credit Compliance Initiative is rated "Ineffective."

This tax credit is no small thing: More correctly known as the negative income tax, the EITC pays $32 billion a year as tax refunds to low-income workers who didn't owe any tax and so couldn't use all their tax deductions and exemptions.

The EITC compliance initiative is supposed to ferret out mistakes and lies on EITC returns, but IRS estimates that at least 24% of the money paid out should not have been paid out. That's ineffective.

Stepping back from what may be an overzealous focus on Treasury, we glance at other management analyses: The OMB reports, for example, that the Defense Department's Air Combat Program is "Moderately Effective," which is an interesting way of characterizing the most powerful air force in the world. OMB has, however, put its finger on an important question: Does the F/A-22, a supersonic stealth fighter-bomber now in development, represent an effective investment, since it will cost much more than the current world's best fighter-bombers it will someday replace?

Somehow, the Department of Agriculture's school-lunch program managed to get a rating of "Results Not Demonstrated." This seems odd for a program that indisputably delivers large quantities of food to the nation's school children, and pays for poor children to get a free lunch. The results of the federally-supported school menu can in part be seen in the expanding waistlines of American children, leading some critics to wonder if the program provides too much food of the wrong kinds. OMB does not address that question, however. The performance and management assessment questions whether free lunches are going to children whose families don't qualify, but also notes that schools do not have to account for their management of the program or their use of federal food.

Interested readers can find the Performance and Management Assessments by going to the White House Web site, www.whitehouse.gov, and typing the report name in the search field. (Interestingly, a check of the Factiva news database 10 days after the budget's release found that only two major newspapers referred to the document by name.)

After the failure of management-reform efforts from the Hoover Commission of the early 1950s to the Clinton Administration's Reinvention of Government, management isn't worth covering.

But if seemingly important programs such as demilitarization of chemical weapons, the biggest anti-poverty spending program and environmental cleanup are rated "ineffective," then taxpayers are entitled to challenge anyone -- even Federal Reserve Chairman Alan Greenspan -- who questions the validity of a tax cut.

Taxpayers aren't getting the government they pay for, and a tax cut easily could be matched with cuts in ineffective programs.

An Old-Fashioned Fate

It takes the tax collector to really ruin somebody

IN ALL THE TALES of malfeasance and nonfeasance that have hit corporate America recently, we never heard the old-fashioned word "ruined" until the case of about-to-be-former Sprint CEO William T. Esrey hit the headlines.

How nice it would be to hear that word used about the people who devised illegitimate partnerships disguising debt, who conjured revenue from thin air or made expenses vanish into the same. But they only cheated shareholders -- and seem mostly to be escaping with their last few million or billion. Esrey tried to play games with -- and is now under scrutiny by -- the IRS for abusing an infamous variety of tax shelter. He stands to be ruined.

Esrey took tax advice from the firm that audited his company, and he had to know that Ernst & Young was ingratiating itself with him because of his power to hire and fire. Plus, the advice was preposterous: Creating a funny partnership to take whopping stock-option profits off your hands for a few years and turn ordinary income into capital gains is the very model of tax-shelter abuse. Too bad he now doesn't have more company.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.